Big Inheritance at 16

Danielle in Colorado Springs lost her mom about a year and a half ago, and she left Danielle and her sisters some inheritance money. Her youngest sister is 16 and will receive the money at 18. How can she help her sister?

QUESTION: Danielle in Colorado Springs lost her mom about a year and a half ago, and she left Danielle and her sisters some inheritance money. Her youngest sister is 16 and will receive the money at 18. How can she help her sister? Dave recommends talking to her about the philosophy of inheriting the money and what to do with it.

ANSWER: I think rather than giving her a bunch of mechanical suggestions, let’s talk to her about the philosophy of this. I will give you one mechanical example to work with. Let’s take $80,000 and blow $20,000 of it. Let’s invest $60,000 into a decent growth stock mutual fund. Let’s say that the stock market averages what it has averaged, 12%. Let’s say that you did that from 18 to 68 years old. At age 68, she would have $23 million.

Is that how she will end up living her life? The answer is no. But what is the point? The point is if you blow all of this because you’re stupid, then we’re going to really call you stupid—like $10 million or $20 million worth of stupid.

If you take financial advice from “they said” and “I heard,” that financial firm will make you broke because the normal person in America is broke. When you take financial advice from broke people, what’s that going to make you? Broke. You need to talk to her about that—who she’s letting influence her, that if you want to have money, you need to talk to rich people. Old rich people, not young rich people.

The point is whether it’s $10 million or $20 million, this has the ability to honor her mother by changing her family tree. If you have $10 million or $20 million at 70, you have changed your entire family tree permanently. You’re old man Vanderbilt. You’re old man Rockefeller. The kids are going to live differently because you had the maturity to not blow the money. That’s thing one: Let’s give her a numerical example. If I’m half wrong, the advice still stands.

The truth is, out of that, she’ll probably end up buying a house someday. That will lower that figure. She probably does need to buy a little car. Whatever she buys, she needs to buy with cash and it needs to be paid for. It doesn’t even need to be new. Eighty thousand dollars isn’t much money. It will go in about 20 minutes, and then she will live the rest of her life with regret.

Here’s the philosophy. Talk to rich people—old ones. Understand that a seed planted now grows a big oak later. She needs good quality people around her—other than just rich people—that she can trust to give her advice on things. A wise person, whether they’re 50 or 15, takes advice from other people. The Bible says, “In the multitude of counsel, there is safety.”

Offer her $100 for a book report on The Total Money Makeover.